The McKinsey model is an important model to develop the proper strategic to attain future growth. It states that businesses should develop their growth strategies based on the below parameters
These parameters are explained below:
Growth can be achieved by looking at business opportunities along several dimensions. All the business opportunities along with risks are pointed in the diagram
The model outlines seven ways of achieving higher growth in the competitive environment. All the ways are explained below
Existing products to existing customers
Increase sales to the existing customer base by improving quality and other additional features. This is all about increasing the frequency of purchase and maintaining customer loyalty which is the lowest risk option to achieve faster growth.
Existing products to new customers
Sell the existing product to new customers by increasing advertising and promotional activities. This can be done by selling products to the customers of the competitors or customers in some new regions. This is a risky option and does not always guarantee success.
New products and services
Faster growth rate can be achieved by introducing new products or services in the existing or new market. It can be done in two ways
Companies with high brand value can easily use the second option to increase product sales and achieve faster growth.
New delivery approaches
The companies can explore and use new distribution channels or new delivery approaches to increase sales volume. Increase in distribution network in already untapped regions helps to boost sales in the same region.
Also new delivery approaches increase sales for Services companies and help them to achieve faster growth rate.
The companies can consider new geographies to expand their business and boost sales. It is one of the most powerful options for growth as it provides immediate results but also it is very difficult option due to cultural differences involved in different geographies and added country risk.
New industry structure
Companies can achieve growth by acquiring troubled competitors or consolidating the industry through merger and acquisitions. Inorganic growth is a very effective medium to achieve faster growth rate.
New competitive arenas
Companies can integrate different business verticals to exploit the different opportunities available in different sectors. It can also use skill of one particular sector to another sector in order to improve the delivery capabilities and quality. Integrating different business can improve the service quality significantly.